2012-04-27 08:30:03 CEST
2012-04-27 08:30:11 CEST
REGULATED INFORMATION
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Finnair Oyj - Interim report (Q1 and Q3)
Finnair Group interim report January 1 – March 31, 2012
Turnover up 10.9% in the first quarter and operational loss reduced by nearly
half, totalling -25.0 million euros
Finnair Plc Interim Report 27 April 2012 at 09:30
Key figures
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1-3/ 1-3/ Change 2011
2012 2011 %
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Turnover and result
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Turnover EUR 591.8 533.7 10.9 2,257.7
million
Operational result, EBIT* EUR -25.0 -43.1 42.0 -60.9
million
Operational result, % of turnover % -4.2 -8.1 3.9%-p -2.7
Operating result, EBIT EUR -20.2 -43.1 53.1 -87.8
million
EBITDAR EUR 24.9 3.6 - 139.6
million
Result before taxes EUR -26.2 -46.2 43.3 -111.5
million
Net result EUR -20.4 -33.8 39.6 -87.5
million
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Balance sheet and cash flow
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Equity ratio % 31.0 34.7 3.9%-p 32.6
Gearing % 44.4 30.0 14.4%- 43.3
p
Adjusted gearing % 111.8 80.6 31.2%- 108.4
p
Capital expenditure, CAPEX EUR 7.4 30.9 -76.1 203.9
million
Return on capital employed, ROCE, % -4.07 -1.5 - -5.20
12 months rolling
Return on equity, ROE, % -9.32 -4.2 - -10.90
12 months rolling
Net cash flow from operating EUR -7.9 -33.9 76.7 50.8
activities million
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Share
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Share price at end of quarter EUR 2.30 3.84 -40.1 2.30
Earnings per share (EPS) EUR -0.18 -0.28 35.7 -0.75
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Traffic data, unit costs and
revenue
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Passengers 1,000 2,076 1,885 10.1 8,013
Available seat kilometres (ASK) million 7,643 7,353 3.9 29,345
Revenue passenger kilometres (RPK) million 5,825 5,339 9.1 21,498
Passenger load factor (PLF) % 76.2 72.6 3.6%-p 73.3
Unit revenue per available seat cents/ASK 6.04 5.56 8.7 6.03
kilometre (RASK)
Unit revenue per revenue passenger
kilometre,
yield cents/RPK 6.92 6.78 2.1 7.24
Unit cost per available seat cents/ASK 6.51 6.39 2.0 6.43
kilometre (CASK)
CASK excluding fuel cents/ASK 4.48 4.70 -4.7 4.67
Available tonne kilometres (ATK) million 1,195 1,133 5.4 4,571
Revenue tonne kilometres (RTK) million 755 688 9.7 2,823
Cargo and mail tonnes 37,892 34,447 10.0 145,883
Cargo traffic unit revenue per
available tonne
kilometre cents/RTK 25.48 26.29 -3.1 27.00
Overall load factor % 63.2 60.7 2.5%-p 61.8
Flights number 18 346 20,502 -10.5 78,916
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Personnel
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Average number of employees 7,212 7,470 -3.5 7,467
* Operational result: Operating result (EBIT), excluding non-recurring items,
capital gains and changes in the fair value of derivatives and in the value of
foreign currency denominated fleet maintenance reserves
CEO Mika Vehviläinen on Q1 2012:
Finnair's sales showed positive development in the first quarter: our turnover
increased by 10.9% year-on-year and the passenger load factor rose to 76.2%
from the corresponding figure of 72.6% last year. The comparison period in 2011
was exceptional, largely due to the effects of the Japanese tsunami of March
2011. However, sales growth in the period under review was primarily achieved
in European markets through more efficient capacity utilisation and successful
campaign pricing. The market situation has been slightly better than we
anticipated, with the exception of the predicted rise in fuel costs. Fuel costs
in January-March increased by 26.2% compared to the first quarter of 2011.
While we can be satisfied with the growth of our business in the first quarter,
our operating result was still negative at -25.0 million euros. This means that
we must achieve significant improvements in profitability. Our aim is to return
to profitability as quickly as possible through a strategy focused on Asian
traffic, leadership in the Nordic region and partnerships. As part of the
execution of this strategy, in the first quarter of 2012 we continued the
implementation of the necessary and inevitable structural reform that was
initiated last year. Our cost savings programme has progressed as planned and
it remains our goal to achieve cost savings of 140 million euros by 2014.
In March we signed a memorandum of understanding on transferring our Catering
operations to LSG Sky Chefs, a German operator, and in April we announced our
plan to transfer our engine and equipment maintenance operations to SR Technics
of Switzerland. If implemented, the latter will mean discontinuing Finnair's
own engine and equipment maintenance operations. However, we will continue to
carry out line maintenance operations in-house. If implemented, both of the
memorandums of understanding signed with major world-class operators will
provide us with cost savings and flexibility that Finnair could not, as a small
airline, achieve on its own.
Throughout the current changes, it is important for us to look after employees
who continue working for Finnair as well as those whose positions in the
company have been discontinued due to restructuring. Finnair is committed to
further developing its human resource policy to ensure that the company
continues to be a good workplace in the future.
I am particularly pleased that Finnair's customer satisfaction continued to
improve in the first quarter of the year. The credit for this, and for the
other important steps we have taken in implementing our strategy, lies with the
people of Finnair who have made tremendous efforts in the interests of all of
our stakeholders, even through this challenging period of change.
Business environment
The global airline industry is undergoing a similar structural reform as that
already faced by many other sectors. Typical for this change process are market
liberalisation, increasing competition, overcapacity, consolidation, alliances
and specialisation. The global consolidation of the industry is predicted to
continue. The intense competition is reflected in the major cost savings and
structural reform programmes implemented by several European airlines, as well
as bankruptcies. Finnair's goal is to take advantage of the opportunities
presented by the changes in its industry and strengthen its position in traffic
between Europe and Asia.
The first three months of 2012 were marked by continuously rising oil prices,
which have now reached record levels. In January-March, the market price for
fuel was 14% higher than in the corresponding period in 2011. However, at the
same time demand for air travel has exceeded expectations, with many European
airlines reporting improved passenger revenues and load factors despite the
uncertain economic prospects in the Eurozone. Airlines have also been
conservative in increasing capacity, which has also contributed to higher load
factors. During the period under review, Finnair benefited from certain
competitors discontinuing their flights on a number of routes. In the domestic
and Nordic regional markets, the Finnair-Flybe joint venture Flybe Nordic has
launched several new routes and strengthened its competitive position.
Corporate sales grew compared to the previous year, largely as a result of
increased business travel on Asian routes. Cargo demand remained stable in the
first quarter of 2012.
The Finnish package tour market suffered from overcapacity in the first
quarter, resulting in passenger demand and the load factor in the leisure
travel segment being lower than last year. In the comparison period, operations
were negatively influenced by the effects of the Arab Spring.
Structural reform and cost reduction programme
Finnair's structural reform and cost reduction programme, which began in August
2011, progressed according to plan in the period under review. The aim of the
programme is to achieve a permanent reduction in costs of 140 million euros by
2014. The programme is focused particularly on improving the profitability of
short-haul flights.
In the first quarter, Finnair continued to optimise its flight schedules and
route network. The implemented changes enabled the company to reduce its fleet
size and improve load factors in European traffic in January-March 2012. In
February, Finnair signed an agreement to lease four Embraer 170 aircraft to
Estonian Air. The lease periods began in the first quarter and will end in
2015. In addition to the agreement with Estonian Air, Finnair has leased one
Embraer 170 aircraft to Honeywell and announced plans to give up four Airbus
A320 series aircraft as their leasing agreements expire in spring and autumn
2012. Fleet optimisation efforts are estimated to result in significant cost
savings starting in 2012.
As part of the structural reform and cost savings programme and Finnair's
partnership strategy, Finnair and LSG Sky Chefs signed a memorandum of
understanding in March for LSG Sky Chefs to acquire Finnair's catering
operations. Under the agreement, Finnair will purchase catering services from
the entity currently operating as Finnair Catering Oy, which will be under the
ownership of LSG Sky Chefs. The transaction is pending approval by Lufthansa,
the parent company of LSG Sky Chefs, and by the Finnish competition
authorities. The parties expect to sign the final agreement by the end of June.
The pending divestment and other measures implemented to improve the efficiency
of catering operations are expected to result in significant and permanent cost
savings for Finnair. If realised, the transaction will result in approximately
650 current employees of Finnair Catering Oy and Finncatering Oy being
transferred to LSG Sky Chefs. The transaction does not include Finnair Travel
Retail, which was merged into Finnair's other operations on 1 January 2012.
Several reform projects launched in 2011 were concluded in the period under
review. These include the improvements in the efficiency of sales, marketing
and administration and the discontinuing of aircraft heavy maintenance. In
addition to the published partnership projects, Finnair continued to assess its
options regarding the future of equipment and engine maintenance operations and
made an announcement on the progress of these plans in April.
Finnair estimates that the biggest cost reductions in the entire savings
programme will be achieved in personnel and maintenance costs, which both
account for approximately a quarter of the overall target of 140 million euros.
The share of sales and distribution costs is approximately 15% and the combined
share of IT, fleet and ground handling costs amounts to approximately 30% of
the total reduction target. Finnair achieved approximately 10 million euros of
the targeted savings in 2011 and expects to achieve further savings of 70
million euros this year. The aim is to achieve the remaining 60 million euros
of the overall cost savings target in 2013.
Outlook for 2012
The continuing uncertainty in the world economy and the seasonal variation in
demand as well as continuing high fuel prices are reflected in the operational
result of the first half of the year, which is estimated to be significantly
loss-making. It is expected that the operational result for the second half of
the year, which is traditionally stronger due to seasonal variations, will
reflect improved profitability compared to the first half of the year.
Finnair's passenger traffic capacity with its current structure is estimated
to increase by around 5% in 2012. The growth will mainly come from Asian
traffic, where Finnair will increase capacity in May by opening a new flight
route to Chongqing, China.
Finnair's fuel costs are estimated to be significantly higher in 2012 compared
to the previous year due to increased capacity and high fuel prices.
Cost reductions of approximately 80 million euros out of the structural reform
and cost reduction programme's total target of 140 million euros are expected
to be achieved by the end of 2012. The realisation of the cost reductions will
mainly take place during the second half of the year.
Financial result January 1 - March 31, 2012
As a result of increased demand in passenger traffic, Finnair's turnover grew
by 10.9% (10.8%) compared with the comparison period in 2011, totalling 591.8
million euros (533.7). The Group's operational result, which refers to the
operating result excluding non-recurring items, capital gains and the change in
the fair value of derivatives and in the value of foreign currency denominated
fleet maintenance reserves, was down by nearly half at -25.0 million euros
(-43.1) despite a marked increase in fuel costs. The operating result amounted
to -20.2 million euros (-43.1) and the result before taxes was -26.2 million
euros (-46.2). The net result for the period was -20.4 million euros (-33.8).
Finnair's profit and loss accounting includes the change in the fair value of
derivatives and in the value of foreign currency denominated fleet maintenance
reserves that took place during the period under review but will fall due
later. This is an unrealised valuation result based on the IFRS financial
reporting standard, where the result has no cash flow effect and is not
included in the operational result. The change in the fair value of derivatives
and in the value of foreign currency denominated fleet maintenance reserves
improved the result reported for the first quarter by 9.2 million euros (19.6
million euros).
The exchange rate fluctuation between the US dollar and the euro did not affect
the operational result significantly in the first quarter. At the end of March,
the degree of hedging for a dollar basket over the following 12 months was 69%.
The euro-denominated operational costs in January-March increased to 621.7
(580.8) million euros. Fuel costs, including hedging, rose 26.2% from the
comparison period, amounting to 167.6 million euros (132.8). Personnel costs
amounted to 114.9 million euros (116.8). Other rental costs, which include
rental payments for purchasing traffic, were 30.9 million euros (29.1). Fleet
materials and overhaul costs increased to 40.4 million euros (30.2), primarily
as a result of hand-over servicing for aircraft leased out. In total,
operational costs excluding fuel increased by 1.4% from the comparison period
while capacity increased by 3.9%.
Disclosure procedure
Finnair Plc. follows the disclosure procedure enabled by Standard 5.2b
published by the Finnish Financial Supervision Authority and hereby publishes
its Financial Statements for 2011 enclosed to this stock exchange release.
Finnair's Financial Statements for 2011 is attached to this release in pdf
format and is also available on the company's website at www.finnairgroup.com.
FINNAIR PLC
Board of Directors
Q1 Result briefings
Finnair will hold a press conference on April 27, 2012 at 11:00 a.m. and an
analyst briefing at 12:30 p.m. at Helsinki-Vantaa Airport's World Trade Center,
located at the address Lentäjäntie 3. An English-language telephone conference
will begin at 3:30 p.m. Finnish time. The conference may be attended by
dialling your local access number and using the Participant PIN code: 255856#
Finland - Toll: +358 923101514
Finland - Toll Free: 0800770306
UK -Toll Free: 08002799491
Denmark - Toll Free: 80701618
Sweden - Toll Free: 0200896900
US -Toll Free: 18663059672
FINNAIR PLC
Communications
April 27, 2012
For further information, please contact:
Chief Financial Officer
Erno Hilden
Tel. +358 9 818 8550
erno.hilden@finnair.com
Financial Communications and Investor Relations Director
Mari Reponen
Tel. +358 9 818 4054
mari.reponen@finnair.com
IRO Kati Kaksonen
Financial Communications and Investor Relations
Tel. +358 9 818 2780,
kati.kaksonen@finnair.com, investor.relations@finnair.com
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